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Come on, be honest

Anyone starting up an enterprise wants it to be around for the long term - and that demands straight dealing. Integrity is the best policy because it builds confidence among customers and, internally, it fosters creativity among employees. Besides, lying is hard work. John Morrish reports.

The secret of life is honesty and fair dealing. If you can fake that,
you've got it made. Groucho Marx was a funny man, but his business
advice stinks. Honesty is not something you can fake. It's a positive
quality that can permeate all your dealings with customers, staff,
suppliers and the world in general. Indeed, it is a necessity.

'I'll tell you how I approach it,' says Keith Sharp, UK and Europe
marketing director for Tata Consultancy Services, part of India's Tata
Group. 'As far as I'm concerned, just from a business sustainability
point of view, it is not sustainable for us to come out with anything or
project anything that doesn't have a basis in truth and therefore
honesty about it.

'We're increasingly seeing that our prospects and customers want to be
dealing with, and seen to be dealing with, a company that is
trustworthy, reliable, ethical and honest. It is important in recruiting
these days, and that's good to see: firms that have a justified
reputation for ethics and honesty are more likely to be able to recruit
good people and keep them.'

It helps if that reputation is rooted in a company's history and
culture. Tata was founded nearly 140 years ago by Jamsetji Tata, a
Zoroastrian who committed himself to building an ethical business that
would never resort to bribes or other dishonesty. Every chairman since -
and there have been just five - has followed that lead. The group has a
detailed code of conduct, developed over the firm's history, that every
employee is obliged to adopt. Honesty is, says Sharp, 'deep in the
fabric of Tata'.

Honesty leads to trust, which is at the root of good business
relationships. But is the honesty we exercise in business the same as we
practise in the rest of our lives? In the past, there was a widespread
idea that business is a game like poker, in which the standards of
honesty are different. The classic statement of this position came in
the Harvard Business Review of January 1968. In 'Is Business Bluffing
Ethical?', Albert Carr argued that a degree of deception was not
dishonest but standard practice.

'Executives from time to time are almost compelled, in the interest of
their companies or themselves,' he wrote, 'to practice some sort of
deception when in negotiation with customers, dealers, labor unions,
government officials or even other departments of their companies. By
conscious misstatements, concealment of pertinent facts, or exaggeration
- in short, by bluffing - they seek to persuade others to agree with
them.' Those who did not engage in these practices would place
themselves at 'a heavy disadvantage' in their business dealings.

The article gives a number of examples of when such deceptions would be
appropriate - and some would raise eyebrows today. For instance, he
tells of a manager of 58 who dyes his hair black and adjusts his CV to
make out that he is 45. 'This was a lie,' wrote Carr, 'yet within the
accepted rules of the business game, no moral culpability attaches to
it.'

The world has moved on. Business schools explicitly teach honesty, while
agreeing that there need to be limits to voluntary disclosure of
information. 'Never tell a lie,' says Paul Burns, dean of the business
school at the University of Buckingham, 'but you don't have to tell all
of the truth.' In negotiation, you are under no obligation to tell your
customers the details of your pricing structure, nor to volunteer any
shortcomings in your products. These things are nobody else's
business.

Motivational speaker Larry Johnson is co-author, with Bob Phillips, of a
management book called Absolute Honesty (Amacom, 2003). But despite his
title, Johnson admits there are times when 'the whole truth' is not
appropriate. He would not tell his daughter he didn't like her dress
when she was on her way to the prom: 'I would look her straight in the
eye and lie through my teeth. I'm not stupid.'

White lies, he says, are useful in business too: the important thing is
to establish your criteria for when they are appropriate and when
they're not. 'Because, if you are not crystal-clear, it's easy to slip
over the edge and to tell lies to avoid pain when you should be telling
the truth.

'It is usually better to be straight. You don't impeach your
credibility; you build credibility with others, people trust you, and
you don't have to remember what you lied about.'

Tata's Sharp agrees. 'I think honesty is a habit. It's like when you're
driving a car: you need to be in the habit of putting the indicators on
when you are turning left. You need to do it always and not just when
you are in heavy traffic. I just don't think honesty is something you
switch on and switch off. You do it, and it has to be a part of how you
go about everything. I can't imagine trying to assess what's coming up
today and thinking: "When do I have to be honest and when don't I need
to be?"'

Rupert Howell is managing director of brand and commercial matters at
ITV, a company that learned a hard lesson about honesty earlier this
year when Ofcom fined it a record £5.67m for cheating its viewers
in phone-in competitions. Appointed in September 2007, many months after
the events in question, Howell brought with him very different
attitudes. As one of the founders of the advertising agency HHCL, which
began with five people in 1987 and grew over a decade to employ more
than 240, he is a fervent believer in telling hard truths - even when
you don't have to.

'I remember a really silly incident early in the life of HHCL. A
complicated press ad that we'd done for Thames Television had a spelling
mistake in it. We spotted it after it had run. I rang up the client and
said: "Look, I've got an admission to make. There was a typo in it and
I'm really sorry about it." And he said: "I'm really pleased you told me
- no worries, just be a bit more careful next time." If he'd discovered
it, he'd have had every right to be cross.'

But how far should openness go with staff? Burns is wary of giving too
much information, particularly when things are going wrong. 'They don't
like uncertainty,' he says, 'and any business is a lot about
uncertainty. They like a certainty that the business will succeed and
that there's a vision for how it will grow. That doesn't mean the vision
is untrue; it's there and it's enduring for the long term. It's just
that you might be going through a bad patch.'

Howell has a different approach. At HHCL there was a policy of full
disclosure: 'We had a weekly all-staff get-together with a few beers
where we'd tell everybody what was going on. We'd tell them what money
we were making, we'd tell them what we needed to do ... We told them
everything, and it never got out.'

This applied even in bad times. 'We had a lean patch a few years in, as
every business does, and we'd say to people: "Here are the numbers.
We're all going to have to pull harder, and you're not going to get pay
rises until we get these numbers moving." And, guess what? - they all
responded brilliantly.'

Howell believes that staff can be trusted to keep business secrets, so
long as the reasons for secrecy are explained. 'We were scrupulously
honest with our clients and with our staff, and they repaid us in spades
with trust and, ultimately, respect, and that led us to be successful
and profitable.'

Being honest is the starting point for running an honest organisation.
'The worst truth always beats the best lie,' says Johnson. Telling the
truth, he believes, is not always as painful as you think it will be,
and once it's done, you can put the issue behind you. It also enables
you to keep things simple; lying is hard work.

But honesty works both ways. If you are honest with your staff, you need
them to be straight with you. And for that to happen, they have to feel
safe in telling the truth. Not only will this make people happier, it
can also create, in Johnson's words, 'an environment where creativity
can occur more rapidly, because people aren't afraid to say what's on
their mind'.

In his book, and in his speeches and workshops, Johnson sets out a
number of steps for creating an honest culture in a business and using
it as a positive force for business development. You need to get into
the habit of confronting and resolving problems through 'constructive
confrontation', rather than using white lies to paper over the cracks.
You need to establish 'arenas of openness', meetings in which anything
can be raised by anyone. And, painful as it may seem, you must welcome
honesty, even to the extent of rewarding messengers who bring bad news.
'If you do that, the odds go up that people will be straight with you,
whereas if you kill a few messengers, people are not going to be
straight with you.

'An environment where I feel comfortable in saying what's on my mind is
one where, if I see something going on that shouldn't be going on, I
feel it's safe to say something about it - even if it's my boss that's
doing it.'

It's not only about culture, it's about structures. Tata Consultancy
supports whistle-blowers through a network of 'ethics counsellors'
independent of HR: there are 20 in the UK alone. Cadbury is another
company whose emphasis on values goes back to the religious convictions
of its founders. Honesty is one of the business principles to which
everyone has to sign up annually. There's also online training in
ethics, including case studies dealing with such topics as conflicts of
interest.

'I'm not saying no-one ever lies, cheats or steals at Cadbury,' says
Alex Cole, corporate affairs director. 'It would be beyond our
capability to prevent those things from happening.' So it has a
'speaking-up helpline', a confidential process through which people can
report dishonesty as well as ordinary HR grievances.

'Every one of those calls is investigated,' adds Cole. 'It might be
anything from fiddling their expenses claims through to theft. If we
weren't finding issues, I'd be worried that the helpline wasn't doing
anything.'

Despite the manifold benefits of honesty, some will continue to
disregard it, and yet, in the short term, survive. 'Life is full of
temptations,' says Burns. 'You can probably get away with the odd lie
now and again, as long as you are not found out. But they tend to catch
up with you. You can only say "the cheque is in the post" so many
times.'

FARZANA BADUEL - THE POWER OF CANDID FEEDBACK

Farzana Baduel left university after two years to start her first
business. Today, she owns and manages an eight-strong accountancy firm,
taxClaim, which specialises in small-business accounts. She also runs a
small commercial property business.

Baduel learnt the importance of honesty in dealing with staff. Being
'polite and diplomatic' by nature, she found it hard to tell them when
they were failing. The problem reached a head when she had to dismiss
someone for poor work and found the culprit had no idea she was in
trouble.

To avoid such nasty surprises, she has introduced a system in which all
staff, including herself, are anonymously appraised by each other. 'It's
very painful,' she says, 'but it's brilliant.' If three or four people
come up with similar comments about a member of staff, it suggests
there's room for improvement - perhaps through training. The key, she
says, is for people to be 'as honest as possible with each other without
fearing any sort of repercussions'.

This is especially important when things go wrong. 'I love hearing about
complaints,' she says. 'It's the only way I know how to improve.' Staff
who have made mistakes are expected to own up, but she tries to set an
example. 'I'm very open myself about making mistakes. I think making
mistakes is the best way to learn. I never get angry with people making
mistakes - unless they lose enormous amounts. It's tempting to get the
gun out and shoot the messenger, but you have to refrain. It's a
constant challenge.'

Good client relationships also demand honesty. She will not make
unrealistic promises about deadlines, which means she loses some
potential clients to less scrupulous competitors. She also reminds
clients that the firm is obliged to report to the authorities any
irregularities it may find in accounts. Honesty is a two-way street.
'Clients who have something to hide end up being very unprofitable,' she
says. 'We don't like clients who are dishonest, because it's bad
business.'

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